Gurgaon-based logistics company Delhivery has intensified its efforts to connect with small and medium businesses (SMBs) in smaller towns, recognizing a rising opportunity as local enterprises aim to reach customers outside their regions.
“There has been an increasing penetration of consumption as well as supply, with brands emerging from both tier 2 and 3 cities,” Mohammed Ali, head of SME business at Delhivery, said. He added, “More people want to explore direct brand platforms instead of relying solely on horizontal marketplaces.”
Delhivery, primarily owned by foreign institutional investors (FIIs), leverages its proprietary technology to streamline logistics operations. Over one-third of its SMB business originates from smaller cities. According to Ali, cities like Vadodara, Raipur, and Thiruvananthapuram have experienced a 40% surge in e-commerce orders in 2024 within the direct-to-consumer (D2C) segment. Key categories driving this growth include groceries (39%), fashion (27%), and beauty and care (13%), as reflected in shipment data.
Cities were once content-selling raw materials and are now shifting to add value to realize better margins. “For instance, cities like Surat and Jaipur, which focused on raw material production, are now moving into manufacturing and design, while places like Varanasi are excelling in carpets and Tirupur in T-shirts,” Ali said.
Talent, though, remains a challenge in smaller cities. “Functions like digital marketing, supply chain optimization, packaging, and product design require specialized skills, often groomed in metros by larger companies,” Ali added. “Entrepreneurs are now figuring out how to train local talent or attract experienced professionals back to their hometowns.”
A joint report by market intelligence firm 1Lattice and VC firm Sorin Investments predicts that the D2C market will expand at a compound annual growth rate (CAGR) of 38%.
Delhivery is prioritizing faster logistics through the use of dark stores. Developed using shipment data, its AI-powered RTO (return to origin) predictor has decreased return risks by 25%. This tool enhances cash-on-delivery (CoD) operations by analyzing customer behavior, industry patterns, and product categories.
“The AI model can tell merchants whether the shipment has a 20% or 80% chance of return. This tech was traditionally available only to large businesses, but we’ve made it accessible to small brands, helping them reduce RTO rates significantly and bring down impact on their profit margins,” Ali said.
